CarnegieEndowment.org: The Egyptian Armed Forces and the Remaking of an Economic Empire

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The Egyptian military has gained unprecedented power since overseeing the ouster of two Egyptian presidents, Hosni Mubarak in 2011 and Mohamed Morsi in 2013. With its major political rivals sidelined, more than $20 billion in Gulf aid, and widespread domestic support for General-Turned-President Abdel Fattah el-Sisi, the Egyptian Armed Forces (EAF) has restarted its defunct industrial operations, secured control over massive infrastructure projects, and inserted generals at virtually all levels of government. But political overreach and internal rivalries may prove obstacles to long-term EAF control.

Regaining Lost Ground

• Since the uprising that removed Mubarak, the EAF has proved itself the ultimate arbiter of Egypt’s economic and political system.
• By protecting the strategic assets of its major investment partners during periods of unrest and taking control of the bidding process for major government procurement, the EAF has become the primary gatekeeper for the Egyptian economy.
• Morsi’s Muslim Brotherhood government acquiesced to many of the EAF’s key demands. But that temporary pact broke down when Morsi tried to sideline the military on megaprojects such as the Suez Canal development plan and Toshka, a land reclamation project.
• Sisi continues to attract substantial support from international investors and foreign governments, notably Saudi Arabia and the United Arab Emirates, which have replaced the United States as the regime’s top patrons.

Future Scenarios

Divisions within the military could surface. The EAF’s new allies and heightened influence may bring out cleavages that had been submerged, as factions struggle to stake a claim to new economic and political turf.

Evidence that the military worked behind the scenes to foment protests and weaken rivals could undercut its power. Revelations that began to emerge in late 2014 about the military’s direct role in financing anti-Morsi protests, as well as the leadership’s overt manipulation of the legal system and the media, may ultimately drive a wedge between the regime and its liberal supporters.

Institutional survival may trump the military’s economic and political aspirations. The EAF’s greatest concern is not a threat to its economic empire but the return of widespread antigovernment protests. If a military-led government must call on its own troops to violently put down protests, it risks both an internal schism and a legitimacy crisis.

The U.S. government is likely to continue military assistance despite the program’s failure to elicit reform from or enhance accountability of the EAF. This partnership, underscored by the March 2015 lifting of a temporary U.S. ban on weapons to Egypt, will become an even greater political liability for Washington as violence against Egyptian civilians continues.

Introduction

The Egyptian Armed Forces (EAF) is often referred to as a “black box”—especially with regard to the institution’s role in the domestic economy. Most of the military-controlled economy is off the books, and many of the EAF’s sources of influence are obscured—such as its control over parliamentary seats titularly reserved for peasants and workers.¹

However, close observation of typically opaque institutions during periods of political upheaval can reveal significant insights that are not readily apparent under everyday conditions. This is certainly the case in Egypt, where the once obscure military hierarchy has assumed increasingly overt and powerful political roles since the 2011 revolution that ousted Hosni Mubarak. It was the Supreme Council of the Armed Forces (SCAF), a small body of top officers that convenes only in times of war or emergency, that took power and ruled the country until the Muslim Brotherhood’s Mohamed Morsi was elected president in June 2012. When Morsi was ousted in a coup one year later, a military-backed interim government (nominally headed by civilians) took control, tasked with overseeing a new round of voting that ended with the election of former defense minister General Abdel Fattah el-Sisi as president in May 2014.

The EAF’s assumption of formal political power forced the institution’s leadership to take a number of extraordinary steps, not least of which was the issuance of official statements in defense of the military’s economic operations, which had previously been considered state secrets. In a press conference held by the SCAF in spring 2012, then assistant minister of defense for financial affairs Major General Mahmoud Nasr divulged the annual revenue of the military’s businesses ($198 million) and its take of the state budget (4.2 percent).² Nasr stopped short of providing any evidence to support these figures, but the military’s decision to formally respond to very public criticism of its involvement in the economy marked a departure from the past.

The EAF’s efforts to maneuver between Egypt’s other political power brokers—primarily the Muslim Brotherhood and the so-called feloul (or leftovers) from the Mubarak regime—played out against a backdrop of authoritarian breakdown that made the economic resources and political practices of the military visible in a way they never had been before. The military’s subsequent struggle to reclaim control over critical enterprises has highlighted how the EAF uses its institutional influence to finance its operations, provide perks for its officer corps, and otherwise shape Egypt’s domestic political economy.

Many global actors—from the Gulf states to Russia to Japan—are now vying for influence with the country’s new political leadership, and presenting a fundamental challenge to the decades of diplomatic primacy enjoyed by Washington policymakers. The response of the U.S. policy community has been to call for increased military assistance and a light-touch approach to criticizing the new government.

Many global actors are now vying for influence with the country’s new political leadership, and presenting a fundamental challenge to the decades of diplomatic primacy enjoyed by Washington policymakers.

But even if Washington doubled its $1.3 billion in annual military aid, the sum would still be dwarfed by an estimated $20 billion in Gulf financial assistance that has flowed into regime coffers since 2013. For now, neither Washington’s money nor its rhetoric is likely to elicit major changes from the Egyptian government. A wiser bet would be to pressure the United States’ Gulf allies to check the regime’s most extreme excesses, including the continued violent repression of opposition activists..................................

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